Emerging Asian Regionalism

(Washington, DC) July 9 – Asia’s exponential growth is vital to the world, as it accounts for approximately twenty percent of the world’s economy, if calculated at current prices, or thirty percent in terms of purchasing power parity. In this rapidly changing economic landscape, Asia is moving towards a multi-faceted economic network to maintain healthy relations with other nations. Complex economic development, however, creates structural tensions, and there is a growing need to find common ground to collaborate with neighboring countries. Dr. Jong-Wha Lee, Head of the Asian Development Bank’s Office of Regional Economic Integration (OREI), keynoted a seminar co-sponsored by the ADB and U.S. Chamber of Commerce launching ADB’s new study on emerging Asian regionalism. Dr. Giovanni Capannelli, a specialist in Asian economic development and regional integration at the ADB, and Dr. Peter Petri, who was the principal consultant for the study and is the Carl J. Shapiro Professor of International Finance at the Brandeis International Business School (IBS) as well as a Senior Fellow of the East-West Center in Honolulu, Hawaii, provided additional perspectives on these trends in Asia and on how this evolving regionalism could benefit North America.

Lee opened by providing some background on Asia’s recent economic growth, highlighting the resilience of the ASEAN+3 countries following the Asian financial crisis of 1997/98. Since then, Asia’s markets have strengthened and become more interconnected, and capital markets have grown both as a share of total financial assets and relative to GDP. Today, Asia is witnessing the emergence of its own brand of economic integration, or regionalism, that is distinctly open, pragmatic, and bottom-up. Led principally by the dynamic growth of China and India, this new force, Lee stated, “has the potential to create a more integrated, prosperous, and peaceful” Asia.

The benefits of regionalism, said Lee, are both numerous and clear; the economic momentum driving the trend will likely increase financial stability and productivity within the region, and even lead to the creation of an integrated market for trade and investment. Dynamic and outward-looking Asian regionalism is good for Asia and good for the world. The benefits also extend beyond the economic realm: a more integrated region could also result in more effective multilateral systems to combat disease, poverty, and income inequality issues. In global affairs, integration would also strengthen the region’s voice in international policy forums and multinational organizations.

At the same time, however, competition for certain products and industries will inevitably create tensions among Asian countries—tensions that represent the central challenge of Asian regional cooperation. Creating complementary regional strategies and macroeconomic policies will require cooperative mechanisms, such as dialogues like the Chiang Mai Initiative, with greater focus and less overlap. Making these institutions more effective and sustainable will require years of cooperation, said Lee, yet building the foundations should begin now.

The next speaker, Dr. Giovanni Capannelli, presented the results of a survey that gathered the reactions of Asian opinion leaders toward emerging regionalism. The results point to an increasing awareness among governments that the benefits of regionalism would outweigh the costs and challenges. In sum, leaders are “thinking in regional terms” now. As highlighted by Capannelli’s presentation, the majority of Asian respondents appear amenable to the idea of increased integration and are keen to fill in the economic gaps between Asian nations. To that end, they are also, according to the surveys, eager to establish a regional common market and a more integrated economic community.

Dr. Petri, offering his perspectives on North America, explored the broader implications of such regionalism, and in particular its costs and benefits for the U.S. Technology, digital communication, and computers have divided production processes and, despite globalization, many parts of the world economy are developing higher levels of intra-regional trade. Inter-governmental agreements are a natural consequence. The United States, said Petri, can play a more constructive role in shaping this regionalism. Moving forward, the U.S. should create stronger connections with Asian institutions to encourage outward-looking integration and to support new platforms for development, which will in turn lead to a more robust global economy.